ISLAMABAD (Mudassar Ali Rana) – The International Monetary Fund (IMF) on Saturday demanded zero inflow of circular debt in Pakistan’s power sector during the current fiscal year, as part of the ongoing economic review talks with the government’s economic team. according to well-placed sources, detailed discussions were held between the two sides on key issues including circular debt management, consumer levy on captive power plants, and implementation of tariff rebasing.
During a presentation, the IMF delegation was briefed on the government’s comprehensive plan to eliminate circular debt within 3 to 6 years. IMF was informed that by the end of the fiscal year 2025, the circular debt stood at Rs. 1,614 billion a reduction of approximately Rs. 780 billion compared to FY 2024.
In FY 2023, circular debt had reached Rs. 2,310 billion. during FY 2025, the government provided Rs. 1,225 billion in subsidies for the power sector, while losses of electricity distribution companies (DISCOs) were reduced to Rs. 397 billion. This marks an improvement of Rs. 190 billion compared to FY 2024, when estimated losses exceeded Rs. 635 billion. a significant financial arrangement between the government and local banks amounting to Rs. 1.2 trillion has brought down the circular debt to around Rs. 400 billion.
To repay the bank loans, consumers will pay a surcharge of up to Rs. 3 per unit for the next five years. economic team assured the IMF that inflows contributing to circular debt would be controlled during the current fiscal year. Additionally, the IMF delegation was briefed on tariff rebasing reforms, which will now take effect from January 1 each year instead of July. this change will be implemented starting from 2026, and DISCOs will be required to submit proposals prior to the annual rebasing after evaluating all operational and financial needs.
In a parallel meeting, the IMF also reviewed the FBR revenue performance for the current quarter, including income targets and shortfalls. team also briefed that the government will spend Rs. 80 to 100 billion this fiscal year on incentive schemes to boost remittances. Last year, the government provided Rs. 124 billion in incentives to support overseas remittances. Further talks between the IMF and Pakistani authorities are scheduled for Monday.